SPOTLIGHT EUROPE: The EU will Never be the Same Again

EU REFERENDUM SPECIAL

16 May 2016, Maria Borelius

In Stockholm a few weeks ago, I met a Swedish friend. She is a woman in mid-life, thoughtful, entrepreneurial and running her own company. She told me about how she cast her vote in the Swedish EU referendum in 1995, and how she had turned to her father for advice. This man, a well-known Swedish economist, did not blink. “Vote yes”, he said, “the Brits will ensure the EU stays sane”.

“So”, she now asked, “will the Brits leave? And what will happen to us then?”

There are many like her. Swedes who not only like the Britain that says yes and please, the Britain that trades so freely with the world, the Britain that serves lukewarm beer in jolly pubs - but also the steady companion to Sweden in the EU. Both countries are strong democracies, free-trading, moving happily between being old monarchies and yet absolutely comfortable in a modern world.

Since the two European referenda in Sweden, there has been little talk about Europe, until the recent refugee crisis. So Swedes do have a hard time coming to grips with the intensity of the British EU debate.

It is just so different from home.

The British debate is certainly more noisy and garish than the Swedish. But for those who listen carefully, the orchestra has many instruments. There are the certain “inners” in one corner, and there are the certain “outers” in another. Some of these, it’s true, play vulgar and loud.

But in between there are a whole array of players who in different tonalities play a subtle tune that best could be described as “reforming”. This tune says: “the EU in our dreams is a beautiful idea, but the EU of the real world is less so. Too static, too bureaucratic, undemocratic.” “Let us reform it”, they say. “Let us make it work, for us.” Every marriage, every company, every house needs an overhaul once in a while. Institutions set up for 6 nations in the 1960s also need change. The EU needs change.

Which is exactly the agenda David Cameron brought to Brussels a few months ago, with results some say were major and others thought were barely a scratch on the surface. Let us look briefly at what he asked for.

“Europe must increase its competitiveness”, he said. Losing market shares in the global race will not do. Cutting red tape and enhancing free flow of services is key to a further growing Europe. Today services constitute 70% of the industrial output, but less than a quarter of the internal trade. Releasing this effective trade block would add an extra 2% to GDP within the union, research by independent think tank Open Europe showed.

Cameron also talked about the status between non-euro and euro-zone members. The UK, just as Sweden, needs to ensure full status as a member, without having to take economic responsibility for the blazing fires that yet again might erupt from the non-digested Eurozone crises.

He talked about democracy, and how countries should be allowed to block unwanted attempts from Brussels to grab powers from national parliaments, through a red card system on subsidiarity issues. (Subsidiarity is a fancy word for letting decisions be made as close to people as possible.)

Cameron also spoke about the importance of the EU allowing a free flow of working people. Not the free flow of welfare travel. All these are balanced principles for EU reform, where most Swedes would agree if they gave it some serious thought. Now Cameron got the deal he got, and has blasted full ahead towards the 23 June referendum. The full orchestra of opinions have to boil down, into a stay or a leave, and currently (April) the two sides seem tied in the opinion polls. With the inners slightly ahead, but the outers more inclined to go vote at all.

An EU without Britain, what will it be like, my friend asked. This is a wise question, as things will have to change. There are four reasons why the EU would never be the same again.

First in regards to trade and jobs. The land that once ruled a third of the world still stands as a cornerstone for global free trade, both in terms of political agenda but also in terms of “realpolitik” and votes. Without Britain, the free-trading block in the European Council will become a minority and have a hard time resisting the protectionist block.

The UK economy is not only the fifth largest in the world, but also growing faster than the EU average. With one million new jobs being created in the UK 2010-2015 versus half a million jobs in all of the other 27 countries, the Anglo-Saxon labour-market is the whiz-kid on the block, proving to be more agile and faster responding to the needs of a globalized economy than the rigidly regulated labour-markets of the south. The UK success reminds the EU to stay like a light weight boxer, quick on the feet, constantly moving, to keep members competing globally. Sweden, with its many global companies, profits from noise from the buccaneering market liberal UK. This noise will disappear.

Secondly, the UK has been like a hawk controlling EU budgets, ogling any spiraling spending, any ballooning agricultural subsidies and the ever growing salaries of the EUcracy. This stern Anglo-Saxon housekeeper will disappear, and the work has to be done by other nations with equal muscularity.

Thirdly, the security and stability provided by a country with the world’s third largest defense budget, one that is a cornerstone member of NATO and a permanent member of the UN Security Council, cannot be underestimated. Example: where did the French turn after the November 2015 terror attacks? To the EU? No. Neither the Europol nor the Club de Bern have operational capacities to deal with terror threats effectively. To Berlin? Not on the agenda. So they turned to London, where some of the world’s foremost security experts flew over in a matter of hours.

Fourth, the euro. Our neighbours, the Danes, negotiated a permanent opt-out of the Maastricht Treaty, but Sweden and the UK were meant to become euro-zone members once certain criteria were met. David Cameron now got a specific, for the UK only, exemption from the principle that the euro is the EU’s only currency. This means, some say, that the pressure on Sweden to eventually join will become firmer, as we have formally signed up to do so. Sweden now stands in this queue with Bulgaria, Croatia, the Czech Republic, Hungary, Poland and Romania. Who will replace Britain’s role as protector of the Swedish status? This is not your favourite line up, if the house starts burning.

Finally, a certain EU discontent is brewing all over Europe. We talked about the unresolved euro-zone crises, which must be resolved through either a fiscal and distributive union with the little ladies in Osnabruck picking up the bills for Greek early retirements OR a strict German/ECB overcoat on the heavily indebted euro-zone countries. None of these solutions will come pain free, to say the least. What was it they said last year in Athens during that hot midsummer bailout crisis? With effigies of Angela Merkel burning, they chanted “Nazis go home”. Some predict a new eruption of the crisis this summer.

There are the problems of the Schengen area, in the light of millions of refugees. A deal was made with Turkey, but tensions are massive and human suffering real and present. And now Hungary is announcing a referendum on the EU distribution migrant scheme, suggesting that there is no joint EU solution to the problem, but rather a myriad of national agendas and approaches to this delicate challenge.

This will, together with the Brexit referendum in June, be the fifth referendum on relationships with EU within a year, as Greece, Denmark and Holland came before.

What this means?

Not only the Brits are complaining. The EU is in deep flux. And Swedes better start having an opinion.

Maria Borelius is a London based Swedish entrepreneur, an award winning journalist, currently columnist for the Swedish financial daily Dagens Industri, and producing the “London-Pod”, a current affairs pod on politics, business and finance. She is also on the board of Open Europe, with offices in London, Berlin and Brussels, driving change for a reformed free-trade EU.